Commodities

Russia’s Prokhorov exploits gold reserve thirst

3 Jun 2011

The oligarch wants to merge Polyus Gold, which he partly owns, with a global industry player. A tieup would boost the investor appeal of Russia's largest gold miner, in return for which it can offer access to its enormous reserves. But price is likely to be a sticking point.

Glencore banks don’t merit full IPO kicker

27 May 2011

The commodity trader's bookrunners sold its $10 bln IPO during a resources selloff, wooing big names to the register. But they tripped on the pricing. Glencore may well disburse an $83 mln discretionary bonus on top of fees of $170 mln. But it's hard to say it's all deserved.

Food inflation favors corporate strongmen

27 May 2011

Fickle weather, decreasing farmland and more mouths are pushing up prices of wheat and other soft commodities. Companies are now being forced to pass along these costs to consumers. Big brands and proactive market leaders, like McDonald's and Pepsi, stand to brave the storm best.

Glencore’s debut may be weaker than it looked

20 May 2011

The Swiss trader's IPO is hugging its float price. But early trading can be deceiving. New issues often benefit from intervention by bookrunners mandated to stabilise the shares. This saves the issuer face, but it can create distortions and attract the wrong type of investors.

Glencore’s IPO gets only middling marks

19 May 2011

The commodity trader's jumbo IPO started trading just a smidgen above its 530p float price. That's not bad. But nor is it great, given the 23 bookrunners, host of cornerstone investors, and a lastminute hike in the price range. Glencore could have priced the deal more keenly.

Valuing G force is key to Glencore float

16 May 2011

The commodity tradercumminer is worth around $56 bln, or near the top of the range, on a breakup basis. But governance concerns mean that it deserves a discount to the sum of the parts. That takes its fair value down to perhaps $50 bln, a bit below the midpoint of the range.

Glencore can learn from Goldman on risk

16 May 2011

The commodity trader's sprawling business is exposed to some unusual risks, from traders going rogue to corruption in frontier markets. Investment banks have been here before. Besides topclass lawyers, a Goldmanstyle standards committee might give investors further confidence.

Global commodity craze should be good for Africa

11 May 2011

But it probably won't be. High commodity prices should bring higher revenues to cashstrapped states. But for development to occur, those funds need be converted into private sector activity. Given Africa's corruption, poor infrastructure and bad policies, that's a tall order.

Oil crash shows investors still trust flawed model

9 May 2011

Historic price movements suggest last week's sell off in commodities should happen only once every several thousand years. It is surprising that riskassessment techniques undermined by the credit crisis are still used. But it also reflects a lack of decent alternatives.

Commodities rout wouldn’t leave Glencore unscathed

6 May 2011

The commodity giant's trading arm may not be too sensitive to absolute falls in oil or metal prices. But the bulk of Glencore, its mining assets, would be. And financing could be harder if collateral falls in value. Still, the pain would be less than for a pureplay miner.

Volatile commodities pose sizeable contagion risks

6 May 2011

Worse for global investors than high oil prices are volatile oil prices. More worrisome still is the slide could be part of a messy unraveling of speculative commodity investments that started with silver. It could create a domino effect across financial markets.

Commodities’ correction is good for growth

5 May 2011

Bullish investors in commodities are choking on their own bubbly. What's frightened the speculators most is weaker data, especially in the United States. The pullback is welcome and necessary because the excessively high prices are a big obstacle to global recovery.

Oil’s slide below $100 sets record straighter

5 May 2011

Like a slowmotion echo of the flash crash a year ago, Thursday s market plunge reflected not one factor but many. With Fed policy stoking speculation, U.S. data suggesting another slowdown and Europe running at two speeds, more volatile trading may be the logical response.

Glencore price range is a stretch

4 May 2011

The commodity trader's IPO values it at $47 to $58 bln before new money. If EBITDA returns to peak levels this year, the lower end marks a reasonable price by mining benchmarks. Cornerstone investor support is striking, but a solid performance post float is far from assured.

Glencore boss can’t afford to stop at $10 bln

4 May 2011

That's the value of Ivan Glasenberg's stake in the commodity trader at the midpoint of its IPO valuation. The worry for new investors is that the CEO has little incentive to add to his wealth. But executives made billionaires by IPOs tend not to lose their ambitious gene.

Abu Dhabi’s Glencore bet won’t be an easy win

4 May 2011

One of the emirate's flagship funds is ploughing $1 billion into the commodities trader. Crisisera investments in Daimler and Barclays delivered stellar returns. But with commodities already hot property and other investors lining up, Abu Dhabi may struggle to repeat the trick.

Mega-syndicate puts Glencore investors in the dark

4 May 2011

With 23 banks and brokerages on the trader's flotation, independent voices on the company's valuation are few and far between. Pricing Glencore's quirky business mix was already going to be tough. It's hard to see how investors benefit from such large syndicates.

Glencore’s peak timing not only echo of Blackstone

3 May 2011

It has become a Wall Street meme that the commodity trader's planned $12 bln IPO marks the top of its industry's boom, just as Blackstone's did. But similarities of opacity, nonstandard governance and sovereign fund investment may also make the comparison apropos.

Hong Kong’s yuan IPO buyers should heed history

26 Apr 2011

China's latest currency innovation recalls the nowforgotten Bshare market, where foreigners could invest directly in mainland stocks. With China's capital account closed, Hong Kong's yuan shares will have scant liquidity. When it opens, they may become irrelevant.

Barrick tries spinning copper into gold

25 Apr 2011

The Canadian firm jumped into the battle for copper miner Equinox, with a $7.7 bln bid that trumps one from China's Minmetals. It's a big premium from a company that mainly touts gold credentials. Barrick's shift as prices of both metals soar may not be the best use of resources.